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Legislative Preview 2012


Journal of the Colorado Association of Home Builders

legislative preview:

Builders prepare to fight Pinnacol privatization, construction defects legislation

Next building trend ‘Little’ Houses offer big opportunities as boomers age

©2012 ProBuild. All Rights Reserved.





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Legislative Preview 2012 vol. 16, no. 1


Official Publication of the Colorado Association of Home Builders

A convenient, nearby asset; supplier of information, or source of knowledge

CAHB executive committee President David Tschetter President-Elect Tom Brinkman

:: features

Treasurer Rob Griffin Secretary David Fiore Immediate Past President Peter Tobin Government Affairs Chair Chris Elliott Executive Officers Council Chair Sue Hibbs


State Representative to NAHB Skip Howes presidential appointment Becky Dow

CAHB Staff Executive Vice President Amie Mayhew

CAHB editorial board Randy Feuerstein, Chair Bill Armstrong Tom Brinkman Karen Durfee Tom Hayden Peter Tobin


06 Legislative Preview

Pinnacol privatization and construction defects keep builders on alert

Next housing surge?

With boomers aging, progressive builders look to ‘little’ houses as next big trend

30 Defending builders

HBAs monitor territories, protect builders at local level

:: departments

28 Building by the Law

Welcome to 2012!

14 Member Spotlight  resident David Tschetter P sets sights on rebuilding ranks and growing reserves

24 Giving Back

 conomy pushes Habitat for E Humanity of Cololorado to creatively think – and build 100 homes last year


Celebrating our 35th anniversary in 2012!

Dedicated to the advancement of the home building industry, Colorado Builder Forum is published six times a year for members of the Colorado Association of Home Builders. Copyright © 2012 by CAHB. No material may be reproduced without the express permission of CAHB. Acceptances of advertisement in Colorado Builder Forum do not imply endorsement or approval of the product or service advertised.

 ow to protect yourself in H the ever-changing mineral rights landscape

32 Finance

 ow Qualified Residential H Mortgages affect real estate sales On the cover: for 25 years, mike kephart, aia, has been designing little houses. this is the first accessory dwelling unit he built, which now sits in front of his own house. Photo credit: michael kephart, aia

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Kim Jackson 303.242.5367 creative director/advertising production

Lindsay Burke Project manager

Susan Humphrey 303.217.4512 account executive

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Editor’s note: In the November/December 2011 Colorado Builder Forum’s

2 Legislative Preview 2012

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04 President’s Letter

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President’s Letter

Welcome to 2012 Every New Year’s Eve brings excitement and anticipation of things to come, and my hope is that this year will be special for you. I believe that for this year to be exceptional, we will need to think differently. Thinking differently as it applies to CAHB and our local association should begin by looking at alternative ways to enhance our revenue opportunities. Since our associations receive most of their revenues from dues and assessments, they all feel the pressure as memberships decline. Having alternate revenue sources during declining membership periods provides your leadership with options as it manages its financial obligations. Colorado Springs is a great example of this type of thinking, as it now manages an event center for the University of Colorado, from which it receives additional revenues for the association. My challenge to each local association this year is to look for new and interesting ways to supplement current revenues by thinking out of the box.

Let’s rebuild our ranks My challenge to you as a member this year is simple: Bring one more! It is important that we, now more than ever, share with those in the industry who are not members the value of advocacy that CAHB performs on our behalf. With the changes that took place during redistricting in the state, our efforts to protect the industry from those who wish it harm have greatly magnified. As we move forward, it will be critical to rebuild our ranks so that we have adequate funding to lobby on behalf of the industry.

Business challenge: Reach younger buyers on their own turf Thinking differently also applies to your personal business. My hope for you is that you dare to be great. To reach new heights, you must be committed to new ways of thinking. The demographics of buyers is shifting to a younger population; how we communicate with this group will determine our success in the future. One area that can impact your business this year is how your company deals with social media. Did you know that there are more than 800 million Facebook users, of which more than half log on each day and have an average of 130 friends? Did you know that you can have a personal Facebook page, along with a business page? Did you know that there are more than 7 million apps and websites integrated with Facebook? The point is, learn how to use this resource to your advantage so the next time you build a new home, develop a new project

4 Legislative Preview 2012

or do a fantastic renovation, you can share that with tens of thousands of potential new clients by effectively using social networking.

David Tschetter CAHB President

Thanks to David Hanson, Peter Tobin for their guidance and leadership As I start my fourth year on the Executive Committee, there has been an individual who has been there with me from the beginning and is now stepping down. It has been my extreme fortune to have known and worked with David Hansen. David has always been the strong voice of reason we needed to hear while navigating through some tough times. I know that I will miss his reasoned thinking and quick wit at our meetings. We wish David the best in the coming year and look forward to his continued contributions on behalf of the organization. I also thank my good friend, Peter Tobin, for his leadership last year. You can count on him to always bring a smile to any situation, and his calmness in tough times has served this association well. During the daunting days our association faced regarding its financial future, you could always count on Peter to be the reasonable voice in the room. I am excited to have him back this year as a valued member of the Executive Committee.

New Executive Committee members named I am please to introduce you to the two new members of the Executive Committee: David Fiore is the new secretary and Rebecca Dow is the President’s selection to the committee. Both of these new committee members are great additions who have served this association well for many years. Please take time to get to know them and thank them for their continued commitment to work on your behalf. I am looking forward to 2012 and the opportunity to spend time with you as we travel around the state. Best wishes for renewed energy and revitalized thinking in 2012. Best wishes to all, David

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L e g i s l at i v e P r e v i e w

Builders’ watch for privatization of Pinnacol and construction defects legislation By Kim Jackson

Colorado’s workers’ comp program is in top five nationwide Proponents of the proposal say that the state can pursue big events, such as the Olympics, with the business development funds. While the Olympics can be a big, one-time boon to Colorado’s tourism industry — and provide jobs in the few years building up to the two-week event — the state could lose one of the most attractive tools it already has in its business development tool box: Its workers’ comp program. Colorado enjoys the fifth-lowest rates and one of the best functioning workers’ comp programs in the country. Claims get paid and it is a solvent program. What’s more, when a company that employs tens of thousands of people considers relocating its headquarters to Colorado, workers’ comp insurance is among its top considerations. Some members, such as roofers and framers, are in a class code for which many insurers will not write workers’ comp policies. As an insurer of last resort, Pinnacol must insure CAHB’s members. In its current form, builders are assured that rates will not skyrocket.

CAHB’s concern: Rates will go up

his is the year the Mayan calendar ends. If what some people say is true, it won’t really matter what the Colorado State Legislature does this session, because the world will end December 21. So eat, drink and keep the merry party going from New Year’s Eve. Come to think of it though, the world didn’t end when the clock struck midnight January 1, 2000. And it’s not likely to end this year, either, so

6 Legislative Preview 2012

quit all that drinking and carrying on already and let’s get down to business. While the biggest issues facing all businesses in the state revolve around the budget, the dark shadow looming over builders is the proposed privatization of the state-chartered workers’ compensation insurance fund, Pinnacol Assurance. In early November, Pinnacol submitted a proposal to Governor Hickenlooper that outlined its plan for transitioning from a

quasigovernmental agency to a privately held mutual assurance company. According to the proposal, Pinnacol can publicly trade its stock with policy-holding Colorado employers. For its part, the state gets a $340 million ownership stake in the company, which will pay a dividend of more than $13 million a year. As proposed, half of that dividend is slated for an education fund, while the other half is scheduled for a business development fund.

However, the Colorado Association of Home Builders is concerned that if Pinnacol is allowed to privatize, rates will increase. CAHB Executive Vice President Amie Mayhew said, “When Pinnacol volunteers to pay all these extra taxes and guaranteed funds as part of this proposal, that has to come from somewhere. The Insurance Commissioner is going to require they raise their rates to stay solvent. That’s why we’re very concerned these rates are going to go up if this passes.” And while the Commissioner sets the rates, insurance companies charge operating charges above those rates. That’s the secondary piece, and builders’ biggest issue with the Pinnacol

proposal. “Either Pinnacol has been overcharging or rates are going to go up,” Mayhew said. “Neither scenario is good for our members.” CAHB Lobbyist Steve Durham observed that home builders have an interest in preserving the present system. “It would appear the proposed changes would significantly increase premiums and we just simply have to oppose any increase in the

cost of doing business. Things are difficult enough in the economy as a whole, without adding significant new costs.” He added that if the legislation created state legacy funds, which are ultimately funded by $340 million worth of stock in the insurance company, “it will have a very significant effect on premiums, if that amount of resources is removed from the system.”

Governor appoints Pinnacol proposal task force The governor’s Pinnacol Proposal Review Task Force met once in November, December and January. Below are the task force members and their affiliations.

Business and Policyholders

John Hughes, M.D., Colorado Medical Society

John Beeble, Denver Metro Chamber of Commerce

Mike Kaplan, Worker’s Compensation Education Association/Plaintiff’s Bar

Chuck Berry, Colorado Association of Commerce and Industry Kelly Brough, Denver Metro Chamber of Commerce Dave Davia, Colorado Association of Mechanical and Plumbing Contractors Chris Elliott, Colorado Association of Home Builders Tony Gagliardi, National Federation of Independent Businesses Bill Hammerich, Colorado Livestock Association Pete Meersman, Colorado Restaurant Association Melanie Mills, Colorado Ski Country USA

Tony Salazar, Colorado Education Association Scott Wasserman, Colorado WINS agents and competitors Kelly Campbell, Property and Casualty Insurers Association of America Jamie Hamilton, Agent Grand Junction Bob Ferm, Hall and Evans (represents American Insurance Association) foundations/public interest Josie Heath, Boulder Community Foundation Ray Kogovsek

Tisha Schuller, Colorado Oil & Gas Association

Mike Kopp

labor and workers

Annie Warhover, Colorado Health Foundation

Phil Hayes, Colorado AFL-CIO

Gail Schoettler

Al Yates

Colorado Builder Forum

Legislative Preview 2012



Elliott appointed to Governor’s task force

8 Legislative Preview 2012

Government Affairs Chair Chris Elliott was appointed by Gov. Hickenlooper to serve on the Pinnacol Review Task Force. Elliott said, "When your business is affected by what's being talked about, having a seat at the table is pretty important. Any time you have a seat at the table, you're not on the menu."

builders. “They try to get everybody they can,” he said, “then say, ‘Well, if we go to trial, we’ll end up getting this mandatory award. You’ll have to pay big bucks then, so you’d better cough up something now.’ That’s our primary concern.”

Bill could kill building multifamily units “The measure so tilts the playing field, it would mean a dramatic expansion in liability and losses, as well as increases in insurance premiums,” Durham said. “Particularly in the multifamily area, the bill would probably eliminate construction of owner-occupied residential homes.” Under current law, a number of builders have already made the decision to not build owner-occupied multifamily residential units, because litigation costs have both overwhelmed them and eliminated any potential profit from their businesses. “If you make the situation worse,” Durham added, “those few projects that are under consideration to be constructed will not be built.” In mid-December, Elliott noted the bill was still a rumor, and if introduced, he expected it would not pass as proposed. “You have a Republican House that should at least be the backstop for any sort of damaging construction defect legislation,” Elliott said. “But you never know; it’s a squirrelly place.”

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CAHB garners support Durham added that CAHB had already met with a number of legislators to make a preliminary case against any legislation that would make builders’ situation worse. “Those have been very productive meetings and we think we’re moving forward with a number of legislators.” In an effort to enlist him as another backstop, CAHB met with the governor, who was not especially receptive. Elliott said, “His admonishment was, ‘You guys come in here and tell me how bad things are and that builders aren’t going to build multifamily anymore. And the plaintiff side is going to hear that you were in here and they’re going to tell me that it’s not nearly as bad as you claim it to be, so you need to get me some tangible facts.’”

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The Government Affairs Committee also caught wind of a rumor that plaintiffs’ attorneys are planning to introduce a bill that will provide a mandatory award of attorney’s fees to a home owner in a case against a home builder or subcontractor. If passed, attorney’s fees would not be subject to the cap on damages that currently exist. In reality, Elliott said, the proposed bill would allow for the plaintiffs’ attorneys to use that as additional leverage to get more dollars out of

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Shortly after receiving the Pinnacol proposal, the governor announced a task force to review it. Durham said, “We’re very pleased that the chair of our Government Affairs Committee, Chris Elliott, has been appointed by the governor to the Review Task Force. We believe that will give us a voice in evaluating the proposal and should provide us a greater opportunity to understand it.” A group of 19 people, who represent Colorado’s key groups and interests — and who would be affected by the Pinnacol restructuring — include business and policy holders, labor and workers, agents and competitors and foundations/public interest groups. While the governor expects the task force to provide guidance on potential legislation, “by design,” Elliott said, “I think the intent of the commission is really to have the participants ask questions of Pinnacol and have those questions answered in the context of those meetings. When your business is affected by what’s being talked about, having a seat at the table is pretty important. Any time you have a seat at the table, you’re not on the menu. Who knows? You may influence what happens.” However, he observed, “if the business community is paying attention, it’s not going to support it. My question is, What’s wrong with the current system?”


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If the bill is introduced, Durham said that home builders are ready. “We’ve used this interim period to accumulate data and build coalitions that we hope would include transit oriented development groups, and other similar groups, in opposing this legislation.”

Builders monitor mandated fire sprinkler efforts The 2009 International Energy Conservation Code marked the first time that the building, energy and plumbing codes were combined under one umbrella. It was also the first time that all new homes were required to contain residential fire sprinklers. The aggressive 2009 code boosts energy efficiency over the 2006 code by 15 percent; CAHB has concerns about the cost implications of installing fire sprinklers in new homes. Builders are also concerned with the liability issues that arise in the event that sprinklers turn on when there’s no fire, resulting in a lot of damage. CAHB Lobbyist Jeani Frickey, said, “Depending on how the systems are constructed, builders may be exposed to greater liabilities with construction defects. The primary reason the 2009

10 Legislative Preview 2012

code is not being adopted as quickly as other versions is because of the sprinkler provision. In addition, new 2012 IECC boosts energy efficiency by another ten or 15 percent. That means from the 2003 to the 2012 versions of the code, energy efficiency requirements have increased between 25 and 30 percent. Frickey said builders had heard rumblings about possible proposed legislation that originally required all of Colorado’s jurisdictions adopt the 2012 code; it was then scaled back to the 2009 version of the code. “We were very concerned about some kind of push to force jurisdictions to deal with the 2009 code sooner than they were ready to do,” Frickey said. “I don’t know what that’s going to look like now. We may not end up dealing with legislation. But it’s something the Governor’s Energy Office is closely watching, so we’re going to continue working on that issue.”

Builders act to keep lowflow toilets out of statute In an effort to avoid mandating builders to install ultra low-flow toilets, the Denver Water Department

proposed a bill to the legislature’s Interim Water Committee that banned the retail sale of toilets with more than 1.28 gallons/flush. Currently, the plumbing code requires 1.6 gallons/flush. Several issues surround how effectively low-flow toilets work within septic, plumbing and sewer systems. There’s a question about whether that small amount of water savings justifies the added expense involved with systems’ maintenance. And the plumbing code requires 1.6 gallons/flush for a reason: Residential pipes require a certain amount of water and pressure moving through them to function well. “When talking about that level of detail— such as how many gallons/ flush a toilet should have, or what the water flow on a sink fixture must be — we’ve strongly held that it be dealt with in the code,” Frickey said. “You shouldn’t put any of that in the statutes. From our perspective, that just doesn’t make any sense.” Frickey observed that it’s something to keep an eye on, even though the bill didn’t make it through the Interim Water Committee. “I don’t know if it’s going to come back in another bill form,” she said.

Builders’ goal: Level playing field for efficiency mandates Looking ahead, Frickey suggests builders keep an eye on discussions or proposed legislation that force energy conservation efforts to take place only with new construction. “We need to make sure, that as a policy, the energy conservation efforts don’t create an unequal field between our more efficient housing stock and existing housing stock, which by nature and definition, is less efficient,” she said. “I think it’s going to be really important that new construction builders get the credit they deserve for building more efficient structures.”

Title insurance bill: Company must have a physical location Builders also expect to see a bill proposed by the Land Title Association of Colorado that would require title insurance companies to have a physical brickand-mortar location in the state. According to LTAC, mortgage lenders with their own title companies — which primarily focus on refinanced and foreclosed properties — are not writing proper title insurance. Even if passed, LTAC doesn’t have the authority to enforce the regulation. As of mid-December, CAHB had not taken a formal position on the bill.

Unemployment insurance: Bond state’s insurance liability CAHB also expects an unemployment insurance bill to be introduced during the session. This bill is a proposal to bond the state’s insurance liability. Durham said, “We owe the federal government a lot of money, so there’ll be an attempt to bond that. It could save the state some money and we might want to support it, but we haven’t seen a proposal yet.” CAHB is watching for the Community Associations Institute — which represents home owners’ associations and home owners’ association management companies — to introduce a measure for review of property managers’ sunset licensure. As a result, to be qualified as an HOA manager, a person needs to take classes and obtain a license from the state. There are an estimated 1,250 community association managers in Colorado; 550 people have the CAI-required designation for the state license. The balance of managers would need to spend a minimum $750 on education and testing to receive the designation and license. It means that more than $500,000 will need to be spent for the balance of managers to become licensed. CAHB’s concern is that to pay for them to become licensed, home owners will see increased HOA dues throughout the state.

Funding found for first nationwide program

Green building incentive pilot program tests its wings After gaining bipartisan

get that pilot program started. We

support, then meeting with resis-

had resigned ourselves to the fact

tance from the Governor’s Energy

that there was absolutely no fund-

Office on builders’ proposed

ing left — and we had missed our

legislation in 2010, the Colorado

window of opportunity, because

State Legislature passed the

it took two years to get it through

CAHB-introduced HB-1160 last

the legislature.” In some jurisdictions, homes

year, the ‘Green building incentive pilot program’ bill — with our

that are built 25 percent above

new governor’s compliments. The

code makes them close to net-zero-

program is reportedly the first of

energy homes. That bodes well for

its kind in the country.

home owners who want to move from their drafty old houses to new,

In summary, when existing home owners choose a newly

comfortable and efficient homes.

constructed home that’s at least 25

CAHB is working out details with

percent above current code, they

the GEO on how owners qualify for

can receive a grant from the GEO

energy improvements to their exist-

to retrofit their existing homes.

ing homes they want to sell, such

Retrofits are to be done based

as qualification requirements for

on testing to determine the most

receiving retrofit funds and whether

cost efficient improvements on the

owners receive a rebate.

existing home, ranging from insula-

“The energy codes are keeping

tion to replacing new windows.

new buildings energy efficient,”

Funding for the program

Frickey explained. “It’s the older

comes from severance tax funds

housing stock that we refer to as

slated for the GEO to make exist-

the ‘giant sucking sound.’ A lot

ing homes more energy efficient

of details have to be worked out

and marketable. While it was a big

about what that dollar amount

win for consumers, builders and

would look like and what skin in

the environment, and although

the game builders would have.”

the funds reportedly had been set

She added, “I’m just excited

aside, there were no funds to be

that we’re able to have that

found after the bill passed.

conversation, because under the previous leadership at the GEO,

Now there’s good new

we had been told essentially to

In December, CAHB learned

pound sand. Sometimes programs

that the GEO had found funds to

appropriately meet their own fate,

jump start the pilot program. Jeani

but in this case, I think it was a re-

Frickey, CAHB lobbyist, said, “We

ally well-thought-out program and

have indications that there may

we’re eager to see if we can get it

be some funding opportunities to

to work.”

Colorado Builder Forum

Legislative Preview 2012



CAHB’s proactive efforts Three items were on the proactive list for this session. One was builders’ efforts to reform the mechanics’ lien statute. “It appears that’s going to be too big an uphill battle to accomplish, so we’ve formally determined we’re not going to do that,” Elliott said. CAHB considered another measure to amend the private transfer fee bill that was passed last year. “The amendment would fix some of the damage that bill caused,” Elliott said. “We’re in the early stages of investigating what options are available.” Finally, the CAHB is considering a measure that prohibits the implementation of a sprinkler system. “At this moment, I don’t know if that ends up as a regulatory or legislative resolution,” Elliott said. “We haven’t taken any action to remove that, so it would probably still be our one proactive effort.”




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So far, builders’ positions are favored While the odds favor builders’ positions on Pinnacol and construction defects legislation, Durham said, “there are never any guarantees. But we feel good about the work that’s been done.” Even so, Elliott emphasized how important it is to continue to stay in touch with your legislators. “Be prepared and ready to call them, send them something, complain, do all those things,” he said. “Above all, stay engaged with them. He added, “We’re in the unenviable position of having one House in the legislative branch that’s favorable to us, and one that’s not. That generally shapes up to be a stalemate. There will be a lot of things that will come at us, but it’s hard to predict at this moment what exactly those will be.”


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12 Legislative Preview 2012

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member spotlight

by Kim Jackson

Politics gave way to real estate

The Tschetter family gathered for the annual Christmas photo in December. Top row, from left: Daughter-in-law Sherri, son Walter, grandson Jack, son Paul. Middle: Grandson Lucas, granddaughter Keely, Susie, David. Bottom: Granddaughter Natalia, son-in-law Jeff, daughter Christie.

David and Susie in earlier years together. After 30 days of dating, David asked Susie to marry her — and every day after that until two years later, she said, “Yes.”

’12 CAHB President David Tschetter sets sights on building reserves, maintaining membership What do running a political campaign, home building and growing a business have in common? According to David Tschetter, a lot. First, they’re all shortterm deals that start from nothing and— if they’re done well — result in success. In politics, your candidate or issue wins; in home building, your home sells and in growing a business, you have something substantial in a few years. And for the 2012 CAHB President, they’re all closely tied together. The president of virtual real estate firm Tschetco Company grew up in southeast Denver and attended Cherry Creek High School, where his love for the land began. Tschetter is one of seven children; six are boys. The family lived on an acre lot, which backed up to a greenbelt — except that it wasn’t so green. Filled with waist-high weeds and rocks, he and his father cleared the five-acre tract early one summer. Then his father got all the neighbors that backed to the area to chip in $10 a week for David to

14 Legislative Preview 2012

keep it groomed. Using a push mower, “I made about $60 a whack,” Tschetter said. “I did that every summer forever.” He also worked for landscapers and did a stint at the Gates Rubber Company, working with curved rubber hose.

Political Science major dropped out to run political campaigns After graduating from high school in 1975, he went to Baylor University to major in Political Science and Communications. He left Baylor three and a half years later to work on the campaign for former astronaut Jack Swigert’s bid for the U.S. Senate in 1978. Two years later, Tschetter ran the campaign for Republican Mary Estill Buchanan for U.S. Senate, against Democrat Gary Hart. Buchanan lost by 19,000 votes statewide, and, he observed, “had she won the race, I probably would have gone to Washington and taken a whole different path.”

His passion? Brokering deals

After finishing the Buchanan campaign, He has found throughout his career long-time family friend and advisor on the race, that what he really likes best is deal makBill Geravisini, suggested Tschetter get into real ing. “Real estate is something I thoroughly estate. At the time, Geravisini had been the broenjoy,” he said. “I’m not the builder from ker for Van Schaack & Co. in Cherry Creek for the standpoint of sticks and bricks, but several years. Tschetter got his license in March I’ve always enjoyed putting deals together 1981, started working with Moore & Company more than anything. I like deal structure. and became one of its top producers. I like the challenge of building companies, In the late ’80s, Geravisini brokered a of taking a business from nothing deal with Kentwood, which then became to something.” Kentwood Moore. Part of that deal was that He most especially likes the home Tschetter move to Kentwood. About the same building industry. “I love the industry and time, through a deal with Leo Payne, David anything associated with real estate,” he Mandarich bought Van Schaack & Co. Mansaid. “When you think about it, it’s kind darich asked Tschetter to work for him, to of like a political campaign. A campaign David and Susie with Christie, at her which Tschetter replied that Mandarich didn’t is a short-term deal, where you take this graduation from law school. have a broker Tschetter would work for. candidate and build this organization from Tschetter recalled, “He said, ‘If that’s the scratch to one that spends millions of dolcase, who would you work for?’ I was 32 or 33 at the time lars in a short period of time. And in the end, you hope you’re and said I’d work for myself,” to which Mandarich agreed successful in the outcome. Career wise, everything I’ve done is and Tschetter became the broker at the Tech Center office. He associated with building stuff.” started with seven agents and within five years, had grown the office to 115 agents. Revenues likewise grew in that time from Asked Susie to marry him every day for two years $28 million to $300 million in gross sales. As the firm was sold Like most things in life, there was a silver lining while from to one real estate firm to another, Tschetter remained as working on the Buchanan campaign: Tschetter met his wife broker of the office, until it became Devonshire, when he left Susie there. She was responsible for the Federal Election Comthe position. When Coldwell Banker acquired the firm, Tschetter mission reporting in the U.S. Senate race and “from the time I stepped back in for a couple years to help get the office estabmet her, I knew I was going to marry her,” he said. “The first lished again. question I asked her was whether she was married.” After 30 days, he asked her to marry him. Every day thereafter — for two years — Tschetter asked Susie to marry Launched and grew a multimillion-dollar wiring him. “She was coming off a marriage and didn’t think that’s company in two years what she wanted to do,” Tschetter explained. Turns out At the same time, he started another company with a neighthough, it’s exactly what she wanted to do, because after bor. Homesync was a low-voltage wiring company that worked saying ‘Yes,’ the couple tied the knot six months later. “It with builders, so buyers could add stereo surround sound and was a cool deal,” Tschetter quipped. “We’ve had a great time whole house audio to their homes. In two years, the company had growing together.” grown to $6.5 million and was wiring 3,600 homes annually for In the Tschetter household, family is the couple’s top priori44 builders — and he and the founding partner left the company. ty. Children Walter and Christie are now married with families During that time, he also started Tschetco Company with his of their own, their youngest son Paul is beginning his career brother Mark. Their brother John joined the pair at Tschetco, and the four grandchildren keep the couple hopping. “All three and is still in charge of another of Tschetter’s firms, Colorado kids are super close,” he said. “We get together at least once or Custom Homes. “Mark is a real estate attorney, John has been twice a month as a family.” building homes since 1985 and I have done real estate sales and Susie is also Tschetter’s rock. “She’s always been my greatbeen involved with builders forever,” Tschetter explained. est cheerleader,” he said. “Susie is always encouraging me to In 2001, the Tschetter brothers began putting deals together stay out front and do something that’s challenging — and she’s in northern Colorado near Fort Collins. They, like so many always encouraged me to keep reaching.” developers and builders, had been doing business as usual When not with family or working, he works out five or six when a few years ago, the banking industry changed — and times a week, skis when he can, is learning to play the piano everything changed with it. “We lost a lot of our land holdings and is a voracious reader. “If I’m not reading a book, I’m over that situation,” Tschetter said. “Now, we’re in a holding listening to one,” he said. He also has an extensive iTunes colpattern until the market improves and we hope to hang on to lection, to the tune of 1,500 or more albums. one or two of our projects.”

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Finances and revenues top priority list Looking to the year ahead, Tschetter said that although the market remains tough, it’ll be vital to continue being smart with CAHB finances. He hopes that substantial reserves will once again be built up, even though membership has declined. “The organization is in a pretty financially healthy spot, which has been a major focus of the Executive Committee as a whole for the past two years,” he said. Speaking of which, he wants to see local HBAs look outside the box in how they generate revenue. “Colorado Springs is doing a good job with the events center,” Tschetter said. “They’re capturing revenue from different areas of membership.”

Time to get builder-friendly candidates elected As an election year, Tschetter said, “it’s going to be critical that we look long and hard at candidates and in getting the candidates we want elected. We can’t start dealing with another anti-builder legislature again, especially with economic times being what they are. We have to maintain the House or flip the Senate in the upcoming election, so that we continue to hold off those people who want to see things like construction defects impact our members. We need to be in a position to defend our positions going forward. That’s pretty critical.”

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Another goal: Maintain members Because he expects the market to remain tough, “it will be imperative that we do everything we can to keep the members we have.” With a now-financially stable association, Tschetter said, “we have the opportunity to focus on strengthening our financials and how we can help our locals with membership. I’d like to see our locals start to stabilize. Hopefully, we’ve reached the point that where those members left are very stable, so we can move in a positive direction, in terms of revenue and membership services.” More importantly, he added, “we have to look at ways to grow our revenue streams so that we become much less dependent on the fee-based structures — and the fluctuation we see with membership. I’m really hopeful that we can start to look at alternative revenue sources, so we’re not just a membership-based revenue association.” Without the Rocky Mountain Builder Conference, Tschetter’s goal this year is to have somewhere between six and ten events at local HBAs around the state, “so we can help them generate additional revenues. I want to show the locals the state cares they exist. If we’ve done that — and put revenues in reserves — I think we will have had a successful 2012.” FROM TOP: Susie and David (left front) join friends at the top of the World Trade Center, while there to attend to the 1998 U.S. Open Tennis tournament. SECOND: Tschetter likes sports. Here, he and son Paul are at the ’99 Broncos-Jets playoff game. THIRD: David and son Walter welcome Jack to the Tschetter family. FOURTH: The Tschetter family in 1998, with David just behind his father, and surrounded by his five brothers and sister. FIFTH: Susie, Paul and David enjoy strolling through the Giverny Gardens outside Paris.

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Photo credit: Mike Kephart, AIA

LEFT: Mike Kephart, AIA, has been designing ‘little houses’ for 25 years. The president of Kidekick Homes finished this studio/study in Los Angeles last year. below: At just 600 sq ft itself, Mark Druva, CAPS, with Druva Development, ensures the ‘main’ house at 1095 Julian Street in Denver meets the code requirement that it be bigger than the second house on the property. Under con-

Photo credit: Steve Lane

struction behind the house, the ADU is 576 sq ft.

Designed by Andrés Duany, the Seaside community on the Gulf Coast of Florida encourages including second living units

Next home building trend?

Little houses offer alternatives to parent care — in owners’ own back yards With an estimated 77 million baby boomers in the United States — 10,000 of whom turn 65 every day —housing needs will dramatically change for this generation over the next 20 years. Some boomers will downsize or move into retirement communities, while others will take up residence in the basement of a child’s home. by Kim Jackson

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According to a National Nursing Home Survey, in 1985, the population of people at age 65 and older was just five percent of the total population; at age 85 and older, the population was 22 percent. Women accounted for 74.6 percent of the total population of people in nursing homes. If residency ratios remain unchanged, a study performed by the University of Chicago and the University of Illinois projects that the number of people living in nursing homes will double or triple by 2030. The U.S. Department of Health & Human Services’ Administration on Aging (AoA) reported that in 2009, the population of people 65 and older was 39.6 million. Representing 12.9 percent of the total population, or one in eight people, it’s the largest group of seniors in our history. By 2030, there will be 72.1 million people in this group, or 19 percent of the U.S. population. Let’s bring some of those numbers closer to home. In Colorado, the AoA reported there were 533,580 people at age 65 and older in 2009 (the most-recent year reported),

on properties, to make the which represented 10.6 perneighborhood more comcent of the population, and pact and diverse. a nearly 31 percent increase from ten years earlier. What’s more, the American Association of Retired People reported that most people want to spend their elder years living independently in a familiar and secure environment.

New trend: Little houses With aging baby boomers in mind, there’s a trend under way that some architects and builders think will meet an expected surge in housing demand for this generation: Building ‘little’ houses. Little houses are small homes on a single-family lot, classified as accessory dwelling units. By definition, they are smaller than the primary house on the lot, and most range in size from 300 to 900 sq ft. With full kitchens and bathrooms and studios — or even up to two bedrooms — little houses offer an aging parent

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What’s a ‘tiny’ house? the independence desired, with family in a familiar and secure environment. For the caretaker (usually a daughter), little houses offer an easy way to check in on the parent (often a mother) a few times a day. The living arrangement also can save the caretaker from the stress of having to choose between visiting a parent in a facility and attending a child’s afterschool event. Mike Kephart, AIA, has been interested in little houses for a long time. The president of Sidekick Homes got hooked on them through a project he designed in Wadsworth, Ohio ten years ago. The community consisted of 100 homes that were added to a senior community with a nursing home, an assisted living facility and independent homes. Among those homes were three models of cottages that ranged from 700 to 900 sq ft, with a one-car garage. Six to 12 little houses were clustered around little parks throughout the community, which fit its demographic profile: 80 percent of the buyers were senior singles, and most of them were women.

Little houses keep aging parents involved with family He has designed three little houses for owners in Denver, along with several homes sprinkled throughout the country. As boomers continue to march past that 65-yearold mark by the hundreds of thousands every year for the next 18 years, Kephart sees an opportunity to keep them active and involved in family life through these little houses. “People are struggling financially right now,” he said, “so putting mom or dad in an assisted living facility that costs $5,000 a month is not affordable for many people — and it’s not a viable alternative for a long time. Living with a child is better. So the child then either has to remodel the house or add an accessory dwelling unit (ADU). Some will do one thing; others will do another.” Kephart designed a little house for Mark Druva, CAPS, who’s using a property in Denver as a test case for building ADUs. Located at 1095 Julian St., the newly built 576 sq ft house is separated from the remodeled 600 sq ft main house by about 50 feet. The property is just two blocks from a future west line light rail station (the line is slated to open next year), giving residents quick access to downtown. There’s a park across the street and side street parking for the ADU resident. Druva’s motivation for building little houses comes from his experience with his and his wife’s parents. In the span of five years, the couple lost all four parents. The president of Druva Redevelopment directly attributes two of those losses to parents moving out of their primary homes. “Assisted care is a death sentence to the elderly,” he said. “The average stay in assisted care is a year and a half. My father in law lasted a week in assisted care. My mom moved into one of the nicest retirement communities in

20 Legislative Preview 2012


t’s been said that at just 110 sq ft, the first tiny house was built in a small town in Iowa, six years before Hurricane Katrina hit Louisiana.

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However, in the aftermath of Hurricane Katrina in 2005, the Federal Emergency Management Agency introduced 300- to 400- sq ft ‘Katrina Cottages,’ so displaced residents had a place to live while they rebuilt their homes. These inviting, temporary cottages were intended to be an alternative to the traditional gloomy FEMA trailers, which were both more expensive and had just an 18-month life span. Yet something happened along the way. Some people expanded these cottages and converted them into larger permanent homes. Others took the mobile idea and ran with it, so to speak. In fact, the tiny house movement has become a trend of its own and attracts an unique subculture of people who are using them as examples of extreme simple living: + They range from 65 to under 400 sq ft; that makes them cheap to heat and cool. + There’s less maintenance and house to keep clean. + Without a mortgage, owners are free to spend their time and more disposable income pursuing their hearts’ desires. + They’re fully equipped with electricity and plumbing and can be connected to public sewer systems or use portable RV-style sewer tanks. But they’re not without drawbacks. For one, decisions have to be made about what’s materially important; after all, there’s not much space for a big screen TV or a closet full of clothes. And while the entry point is low — they start at less than $40,000, or can be as low as $16,000 if built from a kit— banks won’t write mortgages for them. Most cities’ zoning laws also don’t allow people to live in them, which is why many owners put their tiny homes on wheels and trail them around to different places. Obviously, they’re not for everyone. But for those who want an über-simple, bare bones lifestyle, tiny houses just could be the ticket.

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hello! Under construction: In December, the ADU behind the main house on 1095 Julian St. had been framed out and interior work had begun. It was slated to be complete in February. Behind and to the right are awnings for the future Knox station on the West light rail line, offering easy access to downtown and other locations off light rail.

Denver and absolutely hated it, because of her feeling that she was not contributing anymore. It’s such a traumatic thing for an elderly person and what I’m trying to do is offer an alternative to this nursing home scenario.”

Feeling useful keeps us alive longer

Inside/outside corner details


22 Legislative Preview 2012

Foundation & sheathing sill splashback areas


Kephart observed that in some communities, such as Arvada, allowing ADUs was somewhat of a non-event. Denver was a different story. “The city held group meetings in various neighborhoods all around town,” he said, “and there was a lot of difference between one neighborhood and another. Platt Park welcomed them with some reservation. Washington Park refused to have ADUs in the neighborhood and Park Hill was split. The places where ADUs can be built now is based on the neighborhoods’ responses.”

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Neighborhoods embrace, reject the concept

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One owner for both houses The city of Denver requires that one person own both houses, and live in one of them. Kephart said, “They can rent out either one, but they supposedly can’t rent out both. There are people who will test that.” What’s more, Kephart added, “Municipalities see these ADUs as a way to provide more affordable housing in neighborhoods of all kinds, without having to expend government funds. For example, Santa Cruz, California has a whole program, including a loan program through a credit union, to encourage building ADUs on home owners’ properties. That’s a pretty powerful program to get things going.” When the house is complete, Druva — who’s also a realtor — isn’t clear about how to list the property. “Nobody


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Having an ADU separate from the main residence is ideal, Druva said, “because we can get a daughter in a primary house and a mother in a second house,” he said. “Mothers are always wanting to help. They’re used to being providers; they’re not used to being needy. So if you can put mom in that detached unit and give her something to do — like make dinner — that’s going to make so much difference in her life. When you quit needing her, her health rapidly declines.” He’s building the little house — with its own address at 3424 W. 12th Ave. — to be ADA compliant. With no steps to the door, the large kitchen and bath are wheelchair accessible in the studio home. He’s also eliminated headers over doors. “I’ve gone out of my way to make a universal design, age-in-place ADU,” Druva said. “I’ve wanted to do these ADUs for a long time, because they make a lot of sense.”

Druva is no stranger to blazing trails; he was one of three people responsible for Lone Tree’s incorporation. And as far as he can tell, he’s the first to pioneer building an age-in-place ADU in Denver, which is paving the way for a smoother ride in building future little houses. Meanwhile, he’s had some hurdles to clear. One of the first building obstacles Druva encountered was zoning. On the periphery of R2 districts, the Denver Zoning Department allowed ADUs in the four lots at the end of a block to accommodate additional parking needed on the side street. ADUs also have to be smaller than the main house on the property, which is why Druva’s ADU house is 24 ft x 24 ft. “I decided on that size because it’s the same size as a detached garage. So from the street, it’s not going to look out of character for the neighborhood.” Kephart added that the Waste Water Control Division then assessed a flat fee, regardless of the size of the house, which increased cost/square foot of the house. “People say they don’t sell them that way, but everybody buys houses based on square footage,” he noted, “which makes these houses more expensive per square foot, but not overall.”

knows what to do with these things,” he said. “They want me to list the primary house as the square footage and the second house in the comments. That’s totally unfair because it’s above-grade square footage. And although they have different addresses, they cannot be sold separately, because they share water and sewer. I’ve been blazing a new trail with every step on this project.” Kephart observed that lenders and appraisers don’t have any history on ADUs, which can create a barrier to entry in this market. “People’s ability or willingness to pay during these times is not unlike the rest of the new home market. And compared to nursing homes or assisted living, it’s quite cheap. So financing and appraisals will be a fundamental problem until we have a bunch of them on the ground and we can say they’re worth so much.” Druva’s best-case scenario is that he’ll break even on the project, because “it’s the first of its kind and I’ve put a ton into it. We’re shooting for neighborhood stability and affordable housing. Denver City Council and the director of HUD are excited about it. Once people understand this situation, I think the market’s going to open up and people will jump into it.”


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giving back

by Kim Jackson

:: Gimme shelter ::

Economy offered Habitat for Humanity of Colorado creative ways to build 100 homes last year Every house that Habitat for Humanity of Colorado builds means another family has a permanent place to call home.

Habitat for Humanity of Colorado asked those involved with building homes what it meant to them. In one word, the new home owners wrote on poster boards what having a home means to them.

Thanks to the tanking of the economy, one of every two families in the U.S. is now considered low income. Because credit for many people has been decimated, the American Dream of home ownership may be out of their reach for a very long time. Yet even during recent prosperous times, when ‘anyone’ could get a loan, some families lived then as they live now: At just 30 to 50 percent of the area’s median income. These families have been in a cycle of poverty for generations and often have little hope of breaking that cycle — or of ever buying a home. In response to hard-working, low income families’ need for decent, stable housing, Habitat for Humanity International was launched 36 years ago. Habitat for Humanity of Colorado was started in 1992 and now has 29 affiliate chapters that serve 42

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communities throughout the state. With help from the families that move into their new homes, HFHC continues building simple homes with no-interest, no profit loans, so these families can break their cycles of poverty in a permanent way. Although the economy has affected HFHC, it built somewhere in the neighborhood of 100 homes last year, making it one of Colorado’s ‘biggest’ builders. And the non-profit organization had to get resourceful in how it approached building homes.

Habitat creatively adapted to economy Stefka Fanchi knows first hand that from adversity comes opportunity. The executive director of HFHC, said, “It’s not until you are put in a corner that you realize how creative you can be, both individually and organizationally. Habitat

Volunteers often form stronger ties with colleagues when joining a company’s team to build a Habitat home.

for Humanity has really been very creative in how many new ways we’re looking at builders, serving families and financing our work. We’re also looking at new ways we can partner with philanthropists and businesses. I think that silver lining is just discovering creativity and innovation.” At the end of 2008, HFHC completed its 1,000th house. “About 5,000 people here in the state now have decent, affordable housing,” Fanchi said. “It took us 30 years to do that.” From there, the state organization launched a three-year ‘1,000 Homes’ campaign. “Our goals are always higher than we’re able to reach,” she laughed. “We knew it was an extremely bold goal.”

more comfortable and energy efficient. It helps us showcase how to use our insulation materials to build better homes. In the longer term, these houses also are more cost efficient.” Many smaller local business partners also understand the value of their contributions to the homes they help build in their communities. It’s why many specialists donate their time, and often materials, for every home built in their area. For example, an electrician in one of Colorado’s affiliate chapters donates his time and wiring materials for the two houses that are built each year in that community. A plumber in another area likewise donates his time for the one house a year that chapter builds.

Business partners help, while showcasing specialties

Remodeled homes reflect a shift in need

While resources are limited and needs have changed, Fanchi said, “we have been very fortunate in that we can adapt our activities to meet those needs. Also, we have these wonderful corporate, business and individual partners that have shifted their support for us.” One of HFHC’s business partners is Dow Building Solutions, which provides the blue Styrofoam insulation on all its houses in the state. Since 1983, Dow Chemical Company has been providing funding as a corporate partner with Habitat for Humanity International. Erik Van Oosten, global business communications director for Dow Building & Construction, said, “As a global company, we want to work on building better, stronger and more stable communities in many different ways. We do that in the places we do business.” Part of Dow’s overall objective is to bring three breakthroughs that, Van Oosten said, “will help improve some of the world’s problems. They are around having an adequate food supply, addressing energy and climate change and having decent housing. Working with Habitat, we’re already dealing with the housing objective in a very practical way and it makes a difference.” In their nearly 30-year relationship, Dow has helped Habitat for Humanity International build more than 25,000 homes. Those homes represent millions of dollars in both financial contributions and product. “From a business perspective,” Van Oosten explained, “we help build affordable houses that are

Part of HFHC’s creative adaptation can be seen in the increasing number of remodels taking place throughout the state. The lion’s share of houses Habitat builds has always been new construction homes, and in the past, it averaged one or two remodeled homes a year. Last year, however, Habitat remodeled a record 25 houses in Colorado. “Rehabs are really a reflection of the need in communities across the state,” Fanchi said. “A lot of that goes back to government funding for the neighborhood stabilization program and other available resources to help us meet the needs that normally, we wouldn’t be able to do.” Using volunteer labor, it typically costs HFHC less to build a home from the ground up than it does to buy a foreclosed one, rehab it to Habitat’s standards and sell it. “But available subsidies and renewed community interest in stabilizing these neighborhoods has been a factor in diversifying our activities,” she said. The ‘why’ behind rehabs, though, is a shift in need. “We really can’t continue to build new homes and ignore what this market and recession has done to our neighborhoods,” Fanchi explained. “We want to bring up not just an individual, but an entire community. And we feel that by putting a Habitat home in a neighborhood that may be in decline itself really does bring that neighborhood up, by engaging the folks who live there in the building process and creating energy and enthusiasm in the area.”

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Legislative Preview 2012


giving back

Donated products are used in creative ways The Greeley affiliate has been taking advantage of the area’s foreclosed inventory to remodel houses, and to some extent, the neighborhoods themselves. If a front porch needs to be fixed for a senior or disabled person who lives down the street, the Greeley Area Habitat for Humanity often will do the repair work for the owner. Like new construction, all remodeled Habitat homes are required to be energy While the economy may have soured, Habitat found ways to use the challenges it efficient. “We don’t want to put a family in presented to built 100 homes last year. a remodeled home with an affordable mortgage, only to have a utility bill that exceeds their mortgage,” Fanchi said. “We’ve had some real difficulties within design standards for Habitat for Humanity. with older brick homes and insulation, in particular, and bringThat was an easy enough task. The challenge portion was ing them to a place where the utility costs are comparable on a to maintain affordability while boosting the home’s energy efmonthly basis to new construction.” ficiency and green elements. To hike up the challenge one more Because so much air and heat loss takes place where interior notch, HFHC wanted to ensure that not only was it creative and walls and ceilings meet, the Greeley Area HFH took stock of affordable, the design had to be replicable. “We don’t want to do its donated materials and figured out a new way to improve that for one family and not do it for the next,” Fanchi said. energy efficiency using Dow’s Styrofoam. To eliminate thermal bridging inside the home, the rehab team now uses the blue How you can help Styrofoam to create what looks like a tray ceiling. The best way to help HFHC, Fanchi said, “is to simply “They skin coat it, paint right over it and it looks beautiraise your hand and say, ‘I want to help build it.’ We’ll work ful,” Fanchi said. “So we’re using those materials in a way that together to find something that will really benefit the builder or perhaps was not intended, but adds so much value to the home company that wants to work with us, Habitat ministries and in many ways. It looks beautiful and adds character. It makes the families we serve to really create a special partnership that it more affordable and it’s actually a very simple thing that keeps everyone engaged over the long term.” volunteers can do, as opposed to blow-in insulation — which As you might imagine, corporate partnerships are the backis not a volunteer-friendly activity.” In one home that used the bone of HFHC — and not just monetarily. Some companies’ Styrofoam ‘ceiling trays,’ the HERS rating dropped from 167 to employees (and often, their families) consistently commit to be37, just slightly above Habitat’s new construction ratings. ing on site multiple days throughout a home’s building process. ‘From their perspective, they’re getting a lot out of it,” Fanchi said. “They’re getting that team opportunity. They’re able to see All homes are energy efficient what their money is doing. They’re able to feel really good about Since 2005, all Habitat’s homes in Colorado have been built their company, because they know that it cares about others.” to Energy Star standards. HFHC worked with Xcel Energy and Habitat also wins from the experience. “It’s a phenomEnergy Outreach Colorado to educate construction managers and enal boost to build more homes and serve more families,” partner them with specialists in ratings, construction techniques she observed. and new technologies. At the time, she felt it was an uphill battle “Of course,” she added, “we love financial sponsorships. We against change. Now, though, “I don’t know a single construction need in-kind donations of materials and labor. There are just so manager who would consider doing anything less than Energy many ways we can benefit each other and we just want to be as Star,” she said. “In fact, most are doing more. We have multiple welcoming as possible to any of those.” LEED and net-zero-energy homes across the state.” Home ownership through Habitat for Humanity helps breaks the poverty cycle for thousands of Colorado’s residents Design competition benefits HFHC by giving them a stable, affordable payment. “From there,” The Blue Spruce Habitat for Humanity chapter, which serves Fanchi said, “they’re able to have more the Evergreen/Conifer/Kittredge areas, will soon disposable income they can use for education, be the recipient of the winner of a recent design health care, even food. Having that home challenge with Colorado chapter of the American To get involved: stabilized really does give them a foundation Institute of Architects. Design criteria included for self sufficiency.” keeping the Kittredge duplex affordable and (303) 454-8965 26 Legislative Preview 2012

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Colorado Builder Forum

Legislative Preview 2012



by Rebecca W. Dow, Esq.

Mineral Rights—What home builders need to know to protect themselves County or on the Western Slope, little attention was paid to mineral rights. Now, oil and gas companies are paying up to $6,000 an acre for oil and gas leasing rights in Weld County, and as much as $1,500 an acre in areas once thought devoid of oil and gas deposits, such as El Paso County and Denver. The ‘game changer’ has been the development of the Niobrara Shale Formation, which is a layer of shale about 200 to 400 feet thick that lies 6,000 to 10,000 feet below the surface and extends through much of Colorado. The technique of horizontal drilling and forcing water into the shale formation by hydraulic fracturing (“fracking”) has opened up the possibility of obtaining oil from these shale deposits and has made ownership of oil, gas and mineral rights much more valuable in more areas of Colorado. Home builders and residential land developers — who historically may not have given much thought or attributed much value to the oil, gas and mineral rights to their land — should take another look at what could prove to be a valuable asset.

Ownership of mineral rights In Colorado, the surface ownership of property may be severed and separated from the ownership of ‘minerals,’ such as oil, gas, minerals, gravel, sand, geothermal resources, liquid hydrocarbon substances, casing head gas, coal, carbon dioxide and helium, among other mineral rights. Surface ownership and minerals ownership are distinct private property rights. If different parties own the surface and the minerals, it is known as severed or split estate lands. The different ownership can be created by the reservation of minerals by the government in the original patent or by a land owner separately selling or leasing the subsurface minerals. The owner or lessee of the minerals is entitled under Colorado law to exercise its property rights to develop the minerals. The law allows the minerals owner to ‘reasonable use’ of the surface estate to access the minerals. Many home builders try to acquire the minerals with the surface estate, to avoid exploration in their residential communities.

Acquiring mineral rights If you are purchasing land, you should negotiate to acquire the minerals from the seller. If the minerals are already severed (owned by, or leased to, a third party) or the seller insists on retaining the minerals, you need to obtain a permanent relinquishment or waiver of surface rights of all rights to drill, mine, explore, operate, produce, store or remove any minerals, on, over, in, through, or under (to a depth of 500 feet or more), the land, together with an indemnification from the owner of the minerals, and its successors and assigns, to protect you from any damage caused by the drilling, fracking and exploration activities. If the seller retains the minerals or if the minerals were previously severed, you should obtain a title insurance endorsement — at the seller’s cost — to provide title insurance over the reservation or severance of minerals. Typically, you can obtain a form 100.31 or 28 Legislative Preview 2012

ALTA 9.1 title endorsement. The ALTA 9.1 endorsement is more protective and provides title insurance for future improvements. If you are able to acquire the minerals, the deed of the property should not reserve any minerals to the seller; to avoid any confusion, the deed should expressly include and describe the minerals as part of the property being purchased. If you want the ability to profit from the minerals, you will also need to reserve the minerals in each deed to a Rebecca W. Dow, Esq. home buyer. This reservation language is not included in the standard Bradford or title company forms of deeds. You will also probably need to include a relinquishment or waiver of surface rights for the benefit of your home buyer. If you own the minerals and you want to lease oil and gas rights, you will need to require the oil and gas company permanently relinquish its right to enter the surface of the land to a depth of 500 feet or more, and ask for an indemnification. If the oil and gas company asks for an access right or license to investigate the property before entering into a lease, you should negotiate payment for that right. This payment would be in addition to any signing bonus per acre and the royalties offered by the company for the lease.

Home buyer disclosure It is good practice to disclose to home buyers if the minerals are severed, particularly if you have reserved the minerals in the deeds. Ownership of minerals can be found through the county clerk and recorder’s office or through the Bureau of Land Management, if there is a federal ownership interest. This disclosure may become mandatory under a bill being proposed by House Representative Marsha Looper (El Paso County) in the current legislative session. The bill proposes that beginning in 2013, listing contracts, contracts of sale and sellers’ property disclosures must disclose whether the minerals have been severed, in addition to other requirements – including recording oil and gas leases – to be effective. The bill is not yet in final form, and if passed, would affect your contracts with home buyers. Having a basic understanding of the legal landscape around mineral rights can help you stay on top of the changes affecting your business. If you are concerned about the ownership of minerals, or the potential to retain and lease those rights, consult with legal counsel.

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Rebecca W. Dow is a partner at Holland & Hart LLP, with more than 25 years of experience representing commercial real estate developers and home builders. She has extensive experience representing residential land developers and home builders in all aspects of development. Reach her at or 303-295-8413.

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Local HBAs protect builders against harmful legislation While CAHB defends builders at the Colorado state house, local home builder associations protect them at the local level. Here are a few issues local HBAs face and how they’re handling them on builders’ behalf.

Housing and Building Association of Colorado Springs


Government Affairs

Co m m i t t e e s :

Utilities Committee

Denver Metro Home Builders Association

Land Use Committee

Public Policy Council

Council of Neighborhood Organizations (CONO)

Metro Housing Coalition

Number of jurisdictions monitored:

32 local governments within 8 counties

Number of jurisdictions monitored: Biggest recent issues:

4 major jurisdictions 1 regional fire department 14 individual fire districts

Adoption of 2009 IRC mandatory fire sprinklers Scalable impact fees that correspond with a home’s size Biggest 2011 win(s):

B i g ge st r ec e n t i ssues:

Amendments to adoption of 2009 International Fire Code  ontinued monitoring of fee structures C (building permit, development, water or sewer) Working with the city of Colorado Springs’ revisions to the drainage criteria manual B i g ge st 2 01 1 w i n ( s):

 hrough work with the local utility T company on controlling costs of water taps, builders enjoy a third year of no  price increases.  he HBA is working with the local utilT ity company to hold builders’ cost on a  3/4-inch tap for a single family home.  he HBA identified 35 items for the T city of Colorado Springs to review  during its code scrubbing process. H ow b u i l d e r s b e nefit from H BA’s g ov e r n m e n t a f fa irs efforts:

 he HBA works with jurisdictions to revise T any public policy, rules or regulations.  he association gives the industry’s voice T to government and regulatory affairs.

30 Legislative Preview 2012

 urora’s architectural design stanA dards require all homes be built with 30 percent brick. The requirement is

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a design inhibitor and restricts builders from addressing buyers’ desires or concerns. After two years, the HBA is close to a solution that gives builders options to provide what home buyers want.

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 he HBA has successfully kept loT cal jurisdictions from implementing mandatory fire sprinklers; for those that did adopt it, implementation was delayed to January 31, 2013. How builders benefit from HBA’s government affairs efforts:

 he HBA has saved builders T money by keeping down the cost of doing business.  uilders’ fee increases have been B kept at bay – and in one community, have even been reduced.

Summit County Builders Association Committees:

Government Affairs Number of jurisdictions monitored:

4 towns in the county 2 major ski resorts Biggest recent issues:

 uilders faced size limitations B of homes in Breckenridge’s central district Biggest 2011 win(s):

 hanks to builders showing up en T masse to the hearings, they were successful in warding off the size limitation of homes in Breckenridge’s central district.  uilders also showed up in big B numbers to oppose Breckenridge’s

Composition shingles: 20-year limited guarantee.

plan to downsize its building inspector staff, in an effort to balance its budget. This would have created a backlog of performing inspections and the permitting process. Breckenridge dropped  the effort.

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 y monitoring council, planning B commission and county commissioners’ meetings, builders strengthen relationships with these groups.

 he HBA’s stance is that keeping T a ‘friendlier’ environment makes construction more feasible.

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lifetime. But when windows break, the roof springs

How bui lders benefit f r o m HB A’s efforts:

 he HBA ensures that the legislaT tion various councils and commissioners want to enact is reasonable and doesn’t put an undue burden on the cost of the home.

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by Bryant Ottaviano

Qualified Residential Mortgages and their effect on real estate sales It’s yet another sad attempt by Messrs. Dodd and Frank to write laws and enforce rules against the home owners of this country. This rule requires lenders and bond issuers to retain a five percent stake in the loans they sell, unless these loans meet the requirements of a qualified residential mortgage. One of the main components to acquiring a QRM designation is a minimum down payment of 20 percent. No more mortgage insurance from the private sector or government. No more FHA, VA or conforming loans with less than 20 percent down. ALL GONE.

25 million home owners may not be able to refinance It’s been estimated that it will take the typical first-time home buyer approximately 14 years to save enough money for a 20 percent down payment. Another 25 million home owners will be unable to refinance their current loans, due to not meeting the 20 percent equity requirement that the QRM dictates. But there has to be a catch right? No person could think that this will help the fragile housing market. You’re right; there is a catch: Banks, credit unions, savings and loans – any financial institution – can retain a non-qualified residential mortgage loan, as long as they retain five percent risk in the loan.

Banks will allow non-QRM mortgages — at a risk to home owners Banks can offer a mortgage program that allows five percent down with mortgage insurance. Banks will allow for non-QRM mortgages to be put on their books. However, they will not lend at four percent on a 30-year fixed rate mortgage. They will lend on 5/1 adjustable rate mortgages or five-year balloons. That’s because they do not have the capital to hold $1 trillion of 30year fixed rate mortgages on their books, without being able to relieve that pressure by selling the asset portion of the loan into the mortgage backed securities market. Wait. I thought ARMs and balloons were part of the problem that got us here to begin with, weren’t they? I thought that putting home owners into ‘exotic mortgage loans’ was a bad thing; home owners would find themselves in a potentially harmful situation when the loan ‘exploded’ at the end of the fixed-rate period. How is this supposed to help anyone, except for the banking industry? At best, borrowers are leery of fixed-rate mortgages in the low 4s. How enticed will they be to sign a contract on a home with a five-year balloon at five percent? My opinion: Not very.

32 Legislative Preview 2012

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Lobbyists are pushing for lower down payments Multiple organizations are lobbying to reduce the amount of down payment required to be considered a QRM, in an attempt to help capture more potential buyers. Even if these trade groups are successful in lowering the down payment to 10 percent, nearly 25 percent of all homes sold in 2010 had a down payment of less than 10 percent. Take a look at your homes that were sold last year and see how many sales you would have lost if loans were not available for people who had less than 10 percent to put down. Then see how many of your buyers actually had 20 percent down. I’m guessing that you will find at least one third of your entire sales would have been lost.

Bryant Ottaviano 1st Mortgage Founder and CEO

Only 35 of 135 mortgage changes have been implemented — so far We work with a panel member on Colorado’s Department of Regulatory Division, who recently did a presentation for my company. One fact that stuck with me was this: The Dodd-Frank act has approximately 135 changes to the mortgage industry; some of these changes will not impact you or your buyer, but most will. You know how drastically the industry has changed in the last three years and to date, only 35 of the proposed changes have been implemented or mandated. Yes, 35! That leaves us with 100 additional changes that are coming down the Dodd-Frank pike. QRM is just one of the biggies. And be very clear on this: QRM is a real estate industry killer.

Dodd and Frank are (or will be soon) retired The good news is that Christopher Dodd has been retired from Congress for some time now and Mr. Barney Frank has decided that having his name plastered all over the worst piece of legislation this country has ever seen was enough. He has decided to retire, where he will now spend his time writing and teaching on the lecture circuit. I’m also guessing that Mr. Frank decided that his chances of getting re-elected in November were slim. In the mortgage industry, we have a different definition of QRM: Quickly Removing Mortgage lending.

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